The Psychology of Poverty: Evidence from 43 Countries∗

Does poverty have psychological consequences? Beginning with Easterlin (1974), a growing literature has investigated the association between income levels and psychological outcomes. However, this literature remains focused on happiness and life satisfaction, while little evidence exists about the link between income and other psychological outcomes. Using World Value Survey data from 114,378 respondents in 43 countries, I show here that income is associated with a host of additional psychological variables. Specifically, low incomes predict lower intrinsic motivation and trust, less prosocial attitudes, and more feelings of meaninglessness. These relationships hold for both poor compared to rich people in the same country, and for poor compared to rich countries. Income inequality is an additional predictor of psychological outcomes across countries, and is associated with loneliness, short-sightedness, risk-taking, and low trust; in contrast, GDP growth is not significantly associated with psychological outcomes. All results are robust to controls for individual-level socioeconomic and country-level geopolitical characteristics. Together, these results suggest that income and income inequality are related to a broad array of psychological outcomes. JEL Codes: D03, D87, I30, O12C93, D03, D87, O12